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Edited version of your written advice
Authorisation Number: 1012742407583
Advice
Subject: Concessional and non-concessional contributions
Questions:
Is any amount of the roll-over superannuation benefit deemed to be a concessional contribution?
Is any amount of the roll-over superannuation benefit deemed to be a non-concessional contribution?
Is any amount of the roll-over superannuation benefit deemed to be a capital gain?
Is any amount of the roll-over superannuation benefit deemed to be a taxable operating income item?
Advice:
No.
No.
No.
No.
This advice applies for the following period:
Income year ending 30 June 2015
The arrangement commences on:
1 July 2014
Relevant facts and circumstances
Your client was a member of a complying superannuation fund (Fund A).
In early 200X, Fund A processed a request from your client to roll-over their superannuation entitlements into another complying superannuation fund (Fund B).
Consequently, Fund A rolled over an amount into Fund B and provided an ETP Roll-over Statement to cover the amount rolled over.
In late 20XX, Fund A advised your client that an error was made in the roll-over calculation resulting in an overpayment to Fund B.
As a result of a negotiated settlement between Fund A, Fund B and your client, Fund B will repay an amount to Fund A.
Fund A have issued a draft revised Roll-over Benefits Statement for your client for the correct amount of the roll-over.
The roll-over superannuation benefit does not consist of an element untaxed in the fund.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 102-20
Income Tax Assessment Act 1997 Section 104-5
Income Tax Assessment Act 1997 Section 280-35
Income Tax Assessment Act 1997 Subsection 291-25(1)
Income Tax Assessment Act 1997 Subsection 292-90(1)
Income Tax Assessment Act 1997 Subparagraph 292-90(2)(c)(vi)
Income Tax Assessment Act 1997 Section 295-160
Income Tax Assessment Act 1997 Subsection 295-190(1)
Income Tax Assessment Act 1997 Section 306-10
Income Tax Assessment Act 1997 Section 307-15
Income Tax Assessment Act 1997 Subsection 307-15(1)
Income Tax Assessment Act 1997 Subsection 307-15(2)
Reasons for decision
Summary
No amount of the roll-over superannuation benefit paid from Fund A to Fund B is a concessional contribution or non-concessional contribution.
No amount of the roll-over superannuation benefit paid from Fund A to Fund B is a capital gain.
No amount of the roll-over superannuation benefit paid from Fund A to Fund B is assessable income of the Fund.
Detailed reasoning
Roll-over of superannuation benefits
Section 280-35 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that a member can roll-over their superannuation benefits from one complying superannuation plan to another, or between different interests in the same plan.
Under section 306-10 of the ITAA 1997 a superannuation benefit is a roll-over superannuation benefit if it is a superannuation lump sum, paid to a member, from one complying superannuation fund to another complying superannuation fund.
Subsection 307-15(1) of the ITAA 1997 provides that section 307-15 applies for the purposes of determining whether a payment is a superannuation benefit that is made to you, or received by you.
Subsection 307-15(2) of the ITAA 1997 explains that a payment is treated as being made to you, or received by you, if it is made:
(a) for your benefit; or
(b) to another person or to an entity at your direction or request.
The note to this section explains that:
Paragraph (b) would cover, for example, a direction by you that a payment be rolled over from your original superannuation fund into another superannuation fund.
In this case, the lump sum superannuation benefit was paid by Fund A (a complying superannuation fund), to Fund B (another complying superannuation fund) at the direction of your client. Therefore, in accordance with section 306-10 of the ITAA 1997, the lump sum paid from Fund A to Fund B is a roll-over superannuation benefit.
Concessional contributions
Concessional contributions are defined in subsection 291-25(1) of the ITAA 1997 and include certain contributions and amounts that are included in the assessable income of a complying superannuation fund. These include:
• compulsory employer contributions;
• salary sacrifice payments;
• contributions allowed as an income tax deduction, such as superannuation contributions made by the self-employed;
• some amounts allocated from a fund reserve; and
• notional taxed contributions if you are a member of a defined benefit fund.
The ITAA 1997 does not define the term 'contribution' therefore, consistent with basic principles of statutory interpretation, it is necessary to ascertain the meaning of a 'contribution' to a superannuation fund having regard to the context and underlying purpose of the legislative provisions in which the term appears.
The ordinary meaning of contribution, how a contribution can be made and when a contribution is made is considered by the Commissioner in Taxation Ruling TR 2010/1 Income Tax: superannuation contributions (TR 2010/1). Paragraph 17 of TR 2010/1 considers roll-over superannuation benefits and states:
17. A roll-over superannuation benefit (other than a superannuation benefit that is paid from one superannuation interest of a member in a superannuation plan to another interest of that member in the same plan) and a transfer of a person's benefits from an overseas superannuation fund to an Australian superannuation provider, however made, is a contribution as it increases the capital of the fund in the same way as any other transfer of funds or assets and is made to obtain superannuation benefits for a particular individual.6
Contributions that are included in the assessable income of a complying superannuation fund are set out in the table in section 295-160 of the ITAA 1997.
A roll-over superannuation benefit is specifically excluded from the assessable income of a complying superannuation fund under Item 1 of the table in section 295-160 of the ITAA 1997 and accordingly is not a concessional contribution.
Non-concessional contributions
Non-concessional contributions are defined in subsection 292-90(1) of the ITAA 1997 and include certain contributions and amounts that are not included in the assessable income of a complying superannuation fund.
Subparagraph 292-90(2)(c)(vi) of the ITAA 1997 specifically excludes a contribution that is a roll-over superannuation benefit from the definition of a non-concessional contribution.
Therefore, the roll-over superannuation benefit from Fund A to Fund B is not a non-concessional contribution.
Capital gains and assessable income implications
As mentioned above, the assessable income of an entity does not include a roll-over superannuation benefit (section 295-160 of the ITAA 1997).
Item 2 of the table in subsection 295-190(1) of the ITAA 1997 provides that a roll-over superannuation benefit that an individual is taken to have received under section 307-15 of the ITAA 1997 is included in the assessable income of the receiving complying superannuation fund, but only to the extent that the benefit consists of an element untaxed in the fund and is not an excess untaxed roll-over amount for that person.
As the revised Roll-over Benefits Statement issued by Fund A does not reflect an element untaxed in the fund, Fund B does not have to include any amount from the revised roll-over benefit paid from Fund A in its assessable income.
In reference to any capital gains tax (CGT) implications as a result of the revised Roll-over Benefits statement, section 102-20 of the ITAA 1997 explains that you can make a capital gain or loss only if a CGT event happens (section 104-5 of the ITAA 1997 provides a list of the CGT events).
The amount reported on the revised roll-over benefit statement essentially includes the amount overpaid. As the amount overpaid is considered merely part of a revised roll-over superannuation benefit received by Fund B, it does not trigger any of the CGT events as listed under section 104-5 of the ITAA 1997. Accordingly, no CGT event has happened and no capital gain or loss is made.
It is important to note however, that as there has been an actual decrease in your client's account balance for the relevant financial year as a result of the amount repaid, the amount repaid to Fund A should be returned as an 'outward rollover and transfer' in Fund B's annual return for the relevant financial year in order to reflect your client's correct current account balance.
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